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Cable Technology Feature Article

August 13, 2009

Telcos Gain, Satellite Holds, Cable Loses in Video Market

By Gary Kim, Contributing Editor

The U.S. multi-channel video entertainment business now mostly is a zero-sum business: one provider or segment can gain only at another's expense. In that regard, it appears telco fiber-based video services are gaining ground, if slowly, while satellite providers are holding their own, if a recent ChangeWave survey of 2922 U.S. and Canadian consumers is typical of the wider market.
AT&T's (News - Alert) U-Verse service in particular seems to be gaining momentum over the last quarter.
About 54 percent of ChangeWave poll respondents who say they plan to change providers say they are switching to a fiber-optic service, an eight-point increase since Changewave's previous survey three months ago.
Verizon FiOS (News - Alert) TV remains the top provider that switchers plan to move to in the next six months, with 28 percent of the responses. But AT&T’s U-verse service is the choice of 23 percent of respondents, a jump of seven points since March 2009.
Some 20 percent of switchers say they will move to DirecTV, while 10 percent say they will choose Dish Networks. About four percent say they will move to Comcast (News - Alert) while one percent say they will switch to Time Warner Cable.
Overall, the results suggest one obvious conclusion, other than the perception that optical fiber services have appeal. Cable, as the legacy market share leader, likely has little further upside. Incumbents with huge market share normally lose share as competition heats up.
Satellite services, the traditional cable rival, are holding their own but seem to have reached some natural saturation level with their current offers.
Telcos, as the newest, deep-pocketed challengers, have the most upside, as typically is the case in newly-competitive markets.
There is one consistent finding from virtually all the ChangeWave surveys: Fiber TV providers consistently have the highest customer satisfaction levels. About 47 percent of Verizon customers say they are very satisfied, followed by AT&T at 39 percent. DirecTV gets 34 percent "very satisfied" ratings. About 13 percent of cable customers say they are very satisfied and just 11 percent of Comcast and Time Warner (News - Alert) Cable customers.
The likely result, to the extent that customer dis-satisfaction drives churn, is that telcos should continue to take share in the video market.
Still, progress will be steady and measured. Just 12 percent of respondents say they have plans to change providers within the next six months. That is about two percent a month potential churn. And some of those users will wind up not changing, in the end. Monthly churn of about one percent to 1.5 percent would be what one would expect in the video market.
To the extent that Verizon and AT&T will get about half the switchers, that is a potential six percent shift to telco, about a four percent shift to satellite. And that are gross adds, not subtracting any video customers telco or satellite providers will lose to cable.

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Gary Kim is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Tim Gray